Creating a Rental Property LLC in Arizona

Setting up an LLC for your Arizona rental property plants a cactus of protection in the desert of real estate, offering legal security and tax benefits under the blazing sun of investment opportunities. Unearth the advantages of an LLC to navigate the arid landscape of property management with ease and confidence.

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Do you own, or hope to own, multiple pieces of property? Are you looking to start your own business? A solid option for a new venture is running a rental property business. For an added boost in the investment property world, you can run your rental property business as a limited liability company (LLC). If you make this business choice, we have your back throughout the process.

You can use our Arizona LLC Formation Service for help getting an LLC for your rental properties started quickly and properly. We also offer several business services and products that can help you run your business with ease after you get started.  

Benefits of creating LLCs for rental properties in Arizona 

The LLC business structure is often simpler than some others and can provide you with personal protection and benefits.

Liability Protection

Depending on what kind of business owner you are, you run the risk of personal lawsuits or personal collection efforts against you because of your business’s activities. Normally, this isn’t so with LLCs. In many cases, you can’t be held personally liable for your LLC’s legal and financial issues. 

Pass-Through Taxation

Both LLCs and standard corporations can shield their owners from personal liability. But an LLC offers the simplicity of pass-through taxation instead of the double taxation many corporations endure. Double taxation occurs when a corporation itself must pay income taxes on the money it brings in, and its shareholders must also then pay taxes on distributions they receive from the corporate income. Under pass-through taxation applied to many LLCs, only LLC members/owners pay taxes on their income from the LLC. 

Separation of business and personal property

Under Arizona law, LLCs are distinct from their members. This means that your LLC can own property, and you can normally separate your personal assets from the business. The separation can keep your LLC’s activities from affecting your personal assets. 

Series LLC for real estate investors in Arizona

A series LLC is an LLC that allows owners to group the business’s assets or properties into separate entities. If one group of properties in a series LLC suffers from a legal or financial issue, it normally doesn’t affect other groups of properties in the series LLC. Currently, Arizona law doesn’t recognize series LLCs. 

What to know before creating a rental property LLC in Arizona

As we stated above, placing your rental property in an LLC can give you a boost in the business world. Many of the benefits you can receive are provided by both state and federal law.

Steps to form an LLC for your Arizona rental property

When you’re ready to get your LLC going, you want to do it quickly and properly. We can help you start it with speed, accuracy, and ease with our Arizona LLC Formation Service. We have also included general steps for how to set up a real estate LLC in Arizona below.

Step 1: File your Articles of Organization

You form an LLC in Arizona by properly filing Articles of Organization with the Arizona Corporation Commission. You also pay a fee when you file your Articles of Organization.

Step 2: Publish a Notice in the Newspaper

After filing Articles of Organization, you might have to publish a notice in a generally circulating newspaper from the county where your LLC’s registered agent is. Publishing must last for three consecutive publications. 

Step 3: Buy Property in the LLCs name, or Transfer the Deed

If you purchased your rental property before setting up an LLC, you can transfer the property to the LLC by signing a written deed and acknowledging it before a qualified party. Once the deed is properly written, signed, and acknowledged, you have 60 days to record it with the Office of the County Recorder in the county where the property is located.

For property under a mortgage, you need to have the names on the mortgage paperwork changed to the proper owners. You’ll likely also need to renegotiate the terms and rates of the mortgage. Additionally, you need to alert existing tenants about changes in ownership and update leases and rental agreements to reflect the changes. 

Who should form an Arizona LLC for their rental property?

Generally, forming an Arizona real estate LLC can be good for almost any business person seeking to make rental income from vacation, residential, or commercial properties. It’s often easiest to form your LLC first and then purchase the property in the LLC’s name. With this process, the LLC’s name is on the property’s deed from the beginning. If you own rental property without an LLC, it’s often extra work to get your rental property LLC going. We explain the basics of how property owners can transfer their real estate to their LLCs below. 

How We Can Help

Whether you have a Phoenix investment property or a rental property in another part of Arizona, we have the tools to help you succeed in business. With our LLC Formation Service and our Business Plan Template, we can help you launch your business in a quick, easy, and organized fashion. Once you’re up and running, our Worry-Free Compliance Service can help you stay legally compliant by tracking your compliance deadlines and handling two amendment filings per year for you. Let us help you form a great business foundation so you can take your enterprise to great heights. 

Arizona LLC for Rental Property FAQs

  • In many cases, the main benefit of creating an LLC is limiting your liability as a rental property owner in Arizona. An LLC can protect you from personal liability for legal and financial problems related to your business.

  • There are many ways you can name a rental property LLC in Arizona. Arizona law requires that your name be distinguishable from names already registered with the Corporations Commission or the Secretary of State. Also, you generally can’t use the words “association,” “corporation,” “incorporated,” “bank,” “deposit,” “credit union,” “trust,” or “trust company.” You can’t use the abbreviations of many of these words, and you normally can’t use the prohibited financial words to convey that your LLC is a banking, credit union, or trust business (absent certain conditions). Additionally, your LLC’s name needs to include “limited liability company,” “limited company,” “L.L.C.,” “LLC,” “L.C.,” or “LC.”

  • Many states require out-of-state businesses operating in their territory to register as foreign entities. If you’re conducting the business of your Arizona LLC in your home state, you likely need to register as a foreign entity. It’s best to check with your home state authorities regarding their requirements.

Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.

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Written by Team ZenBusiness

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